CPE Engineering Economics & Contract Management 5

Question 1

In engineering economics, the 'MARR' (Minimum Attractive Rate of Return) represents:

Accepted Answer

The minimum return a company requires to justify an investment

Answer

The MARR is the lowest acceptable return rate set by an organization based on its cost of capital, opportunity costs, and risk tolerance.

Question 2

Which procurement method requires the owner to select the designer and contractor separately?

Accepted Answer

Design-Bid-Build (DBB)

Answer

Design-Bid-Build uses sequential, separate contracts for design and construction, with the owner contracting designer and general contractor independently.

Question 3

The future worth of $10,000 invested for 5 years at 8% compounded annually is closest to:

Accepted Answer

$14,693

Answer

FW = $10,000 × (1.08)^5 = $10,000 × 1.4693 = $14,693.

Question 4

A 'pay-if-paid' clause in a subcontract:

Accepted Answer

Makes the general contractor's obligation to pay contingent on receiving payment from the owner

Answer

A pay-if-paid clause shifts the risk of owner nonpayment to the subcontractor, making receipt of owner payment a condition precedent to the GC's obligation to pay.

Question 5

Which depreciation method is mandated for US federal income tax purposes under the Modified Accelerated Cost Recovery System (MACRS)?

Accepted Answer

Double-declining balance switching to straight-line

Answer

MACRS uses the double-declining balance method switching to straight-line when straight-line yields a larger deduction, based on asset class recovery periods.

(CPE) Certified Planning Engineer Practice Test

(CPE) Certified Planning Engineer Practice Test

CPE Engineering Economics & Contract Management 5